[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MAY 10, 2005
No. 04-10720
THOMAS K. KAHN
CLERK
D. C. Docket No. 03-21822 CV-PCH
AMERICAN BANKERS INSURANCE GROUP,
Plaintiff-Appellant,
versus
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Florida
(May 10, 2005)
Before ANDERSON, DUBINA and BLACK, Circuit Judges.
DUBINA, Circuit Judge:
American Bankers Insurance Group, Inc. (“ABIG”) appeals the district
court’s grant of summary judgment to the United States, finding the long distance
telephone services ABIG purchased from AT&T subject to an excise tax under
Internal Revenue Code § 4252(b)(1). For the reasons that follow, we reverse the
district court’s judgment and hold that the long distance telephone services at issue
are not subject to taxation under § 4252(b)(1)1 or § 4252(b)(2)2.
I. BACKGROUND
A. Facts
1
26 U.S.C. § 4252(a) provides:
(a) Local telephone service. For purposes of this subchapter, the term “local
telephone service” means -
(1) the access to a local telephone system, and the privilege of telephonic quality
communication with substantially all persons having telephone or radio telephone
stations constituting a part of such local telephone system and
(2) any facility or service provided in connection with a service described in
paragraph (1).
The term “local telephone service” does not include any service which is a “toll
telephone service” or a “private communication service” as defined in subsections
(b) and (d).
2
26 U.S.C. § 4252(b) provides:
(b) Toll telephone service. For purposes of this subchapter, the term “toll telephone
service” means -
(1) a telephonic quality communication for which (A) there is a toll charge which
varies in amount with the distance and elapsed transmission time of each individual
communication and (B) the charge is paid within the United States, and
(2) a service which entitles the subscriber, upon payment of a periodic charge
(determined as a flat amount or upon the basis of total elapsed transmission time), to
the privilege of an unlimited number of telephonic communications to or from all or
a substantial portion of the persons having telephone or radio telephone stations in
a specified area which is outside the local telephone system area in which the station
provided with this service is located.
2
Between October 1, 1998, and March 31, 2002, taxpayer, ABIG, purchased
interstate, international, and (in five states) intrastate long distance service from
AT&T. ABIG paid a uniform toll rate for all interstate calls made within the
United States, uniform toll rates for all intrastate long distance calls made within
the five states in which it purchased service, and toll rates for international calls
(other than calls to and from Mexico) that varied only according to which country
the calls were being placed. AT&T collected federal excise taxes from ABIG on
the services pursuant to § 4252(b)(1) of the Internal Revenue Code (“I.R.C.”), and
remitted the taxes collected to the Internal Revenue Service (“IRS”).
Subsequently, ABIG filed claims with the IRS for a refund of $288,496.10,
representing the federal excise taxes collected on services rendered between
October 1, 1998, and September 30, 2001. ABIG later filed claims for an
additional refund in the amount of $73,267.14 for the taxes on telephone calls
placed between October 1, 2001, and March 31, 2002. ABIG sought the refunds,
contending that the federal excise tax on long distance telephone calls does not
apply to calls for which the rate does not vary based upon the distance of the call.
B. Procedural History
The IRS did not respond to either of ABIG’s refund claims. ABIG then
3
brought suit in the Southern District of Florida seeking a refund in the amount of
$361,763.24 in communications excise taxes and interest. The parties filed cross-
motions for summary judgment, and the district court ruled in favor of the
government finding that the word “and” as used in § 4252(b)(1) is ambiguous and
in the context of the statute means “or.” According to the district court, the excise
tax at issue applies to toll telephone service varying by distance or elapsed
transmission time. ABIG then perfected this appeal.
II. ISSUE
Whether Internal Revenue Code § 4252(b)(1), defining “toll telephone
service” as a service for which there is a “toll charge which varies in amount with
the distance and elapsed transmission time” of each call, is applicable to a toll
charge varying with elapsed transmission time, but not distance.
III. STANDARD OF REVIEW
This court reviews the district court’s disposition of cross-motions for
summary judgment de novo, applying the same legal standards used by the district
court, viewing the evidence and all factual inferences therefrom in the light most
favorable to the non-movant, and resolving all reasonable doubts about the facts in
favor of the non-moving party. Gerling Global Reinsurance Corp. of America v.
Gallagher, 267 F.3d 1228, 1233-34 (11th Cir. 2001). Statutory interpretation is a
4
question of law that we also review de novo. Smith v. Bellsouth Telecomm., Inc.,
273 F.3d 1303, 1305 (11th Cir. 2001).
IV. DISCUSSION
A. The plain meaning of § 4252(b)(1)’s requirement that rates vary by
“distance and elapsed transmission time” uses “and” conjunctively
1. The phrase is unambiguous
The IRS collects taxes for toll telephone service, defined as “(1) a
telephonic quality communication for which (A) there is a toll charge which varies
in amount with the distance and elapsed transmission time of each individual
communication.” 26 U.S.C. § 4252(b)(1)(A) (emphasis added). ABIG contends
that the statutory language quoted above is unambiguous, requiring the word
“and” in the phrase “distance and elapsed transmission time” to be interpreted
according to its ordinary, natural meaning. Accordingly, ABIG asserts “and” is
used conjunctively. ABIG urges that to be taxable toll telephone service under
this provision, the toll service must vary by both distance and elapsed transmission
time.
The government contends that the statue is ambiguous and does not plainly
require variation by both time and distance. Contending that the word “and” can
be read conjunctively or disjunctively, the government argues that the district
5
court was correct in determining that Congress did not intend to use the
conjunctive meaning of “and” in requiring under § 4252(b)(1) that taxable toll
telephone service “var[y] in amount with the distance and elapsed transmission
time.”
In construing a statute, “[t]he preeminent canon of statutory interpretation
requires us to ‘presume that [the] legislature says in a statute what it means and
means in a statute what it says there.’” BedRoc Ltd., LLC v. United States, 541
U.S. 176, 183, 124 S. Ct. 1587, 1593, 158 L. Ed. 2d 338 (2004) (second alteration
in original) (quoting Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54,
112 S. Ct. 1146, 1149, 117 L. Ed. 2d 391 (1992)). This inquiry requires the court
to “begin[] with the statutory text, and end[] there as well if the text is
unambiguous.” Id. Furthermore, words are given their ordinary, plain meaning
unless defined otherwise. Id. at 183, 124 S. Ct. at 1593-94; see also In re
Paschen, 296 F.3d 1203, 1207 (11th Cir. 2002). More specifically, unless the
context dictates otherwise, the word “and” is presumed to be used in its ordinary
sense, that is, conjunctively. Crooks v. Harrelson, 282 U.S. 55, 58, 51 S. Ct. 49,
50, 75 L. Ed. 156 (1930) (construing taxing statute and concluding that “nothing
in the context or in other provisions of the statute . . . warrants the conclusion that
the word ‘and’ was used otherwise than in its ordinary sense [,conjunctively]; and
6
to construe the clause [disjunctively,] would be to add a material element . . . , and
thereby to create, not to expound, a provision of law”); see also Bruce v. First
Fed. Sav. and Loan Ass’n of Conroe Inc., 837 F.2d 712, 715 (5th Cir. 1988) (“The
word ‘and’ is therefore to be accepted for its conjunctive connotation rather than
as a word interchangeable with ‘or’ except where strict grammatical construction
will frustrate clear legislative intent.”) (citing, inter alia, Peacock v. Lubbock
Compress Co., 252 F.2d 892, 893-95 (5th Cir. 1958) (construing “and” in the
phrase “an employer engaged in . . . the ginning and compressing of cotton” as
meaning “or” because “it is an acknowledged undisputed fact . . . that compressing
is an operation entirely removed from ginning and that the two are never carried
on together.”) (emphasis added)).
Here, there is nothing in the statutory context to suggest that “and” is used
in the provision as meaning “or.” The phrase is unambiguous. The plain meaning
is clear–“and” is used conjunctively. See also America Online, Inc. v. United
States, __ Fed. Cl. __, 2005 WL 741847, No. 03-2383-T, at *5 (March 30, 2005)
(“Section 4252(b)(1) unambiguously requires that a toll charge vary in amount
according to both the distance and duration of calls.”); accord Honeywell Int’l,
Inc. v. United States, 64 Fed. Cl. 188, 199 (Fed. Cl. 2005); Office Max, Inc. v.
United States, 309 F. Supp. 2d 984, 993 (N.D. Ohio 2004); Nat’l R.R. Passenger
7
Corp. v. United States, 338 F. Supp. 2d 22, 27 (D.D.C. 2004); Fortis, Inc. v.
United States, No. 03 Civ. 5137(JGK), 2004 WL 2085528, at *6 (S.D.N.Y. Sept.,
16, 2004); Reese Bros., Inc. v. United States, No. 03-CV-745, 2004 WL 2901579;
at *7 (W.D. Pa. November 30, 2004). The district court stated that even if it were
to find the statute unambiguous, “this is one of the rare cases where the legislative
intent is sufficiently clear that . . . the [c]ourt would still be entitled to rely on
extrinsic evidence of Congressional intent.” American Bankers Ins. Group, Inc. v.
United States, 308 F.Supp.2d 1360, 1367 n.7 (S.D. Fla. 2004). We respectfully
disagree with the district court’s analysis. Where the statutory text is
unambiguous the inquiry ends. BedRoc Ltd., LLC, 541 U.S. at 183, 124 S. Ct. at
1593. In fact, the statutory context supports the conjunctive use of “and” in §
4252(b)(1)’s requirement that the rate must vary “by distance and elapsed
transmission time.” Though resort to the legislative history is unnecessary, as we
conclude the statute is unambiguous, we note the legislative history supports our
conclusion.
In defining taxable “toll telephone service,” both parties agree that
Congress, through the Excise Tax Reduction Act of 1965, Pub. L. No. 89-44, §
302, 79 Stat. 136 (“1965 Act”), sought to define the method of service provided by
AT&T, the company, at the time of enactment, holding a monopoly on all long-
8
distance telephone services. Prior to the 1965 Act, “toll telephone service” was
defined as “a telephone or radio telephone message or conversation for which (1)
there is a toll charge, and (2) the charge is paid within the United States.” Pub. L.
No. 85-859, § 133(a), 72 Stat. 1275, 1290 (1958). In 1965, it appears Congress
amended the definition to its current language in an effort to modify and update it
“in order to reflect and to meet the changing technology and market conditions of
the industry.” Trans-Lux Corp. v. United States, 696 F.2d 963, 967 (Fed. Cir.
1982). AT&T’s long distance service at that time charged long distance telephone
services on the basis of the elapsed time of each individual call, multiplied by a
rate determined through the use of distance mileage bands or for “Wide Area
Telephone Service,” commonly referred to as WATS, with a periodic charge for
unlimited access within a specified area outside of local service. Thus, at the time
of the 1965 Act, AT&T’s service, which Congress sought to define as taxable toll
service, did in fact utilize rates that varied by both elapsed transmission time and
distance. Moreover, at the time of the 1965 Act, it was likely inconceivable that
charges would be made without reference to distance as now exists.
In addition, Congress was seeking to modify and narrow the definition and
to phase this excise tax out entirely by 1969. See America Online, 2005 WL
741847, at *6 (citing Trans-Lux Corp., 696 F.2d at 966). Congress could have
9
amended the language in 1965 to include broad terms able to adapt to
technological changes; instead, Congress specifically defined “toll telephone
service” with an eye toward the tax expiring four years later. See id.
Consequently, now, forty years later, ‘if the statutory language no
longer fits the infrastructure of the industry, the IRS needs to ask for
congressional action to bring the statute in line with today’s reality. It
cannot create an ambiguity that does not exist or misinterpret the
plain meaning of statutory language to bend an old law toward a new
direction.’
America Online, 2005 WL 741847, at *6 (quoting Nat’l R.R., 338 F. Supp. 2d at
27-28).
Based on the foregoing, we agree with the numerous courts that have
concluded the language in the phrase at issue is clear and unambiguous. See
America Online, 2005 WL 741847, at *5 (“Section 4252(b)(1) unambiguously
requires that a toll charge vary in amount according to both the distance and
duration of calls.”); Honeywell Int’l, Inc. v. United States, 64 Fed. Cl. at 199
(finding § 4252(b)(1)’s phrase “distance and elapsed transmission time”
unambiguous and noting that “and” can be construed in certain contexts
cumulatively, but finding the clearly conjunctive use in § 4252(b)(1) “‘supported
by the fact that both distance and time were . . . factors in determining charges for
toll telephone service at the time of the 1965 amendments[;] in this context, it is
10
only logical to conclude that when Congress wrote the phrase, . . . it meant for the
word ‘and’ to be read conjunctively.’”) (quoting Office Max, 309 F. Supp. 2d at);
Nat’l R.R. Passenger Corp., 338 F. Supp. 2d at 27-28 (finding phrase
unambiguous; “and” intended conjunctively); Fortis, Inc. 2004 WL 2085528, at
*6 (same), Reese Bros., Inc. v. United States, 2004 WL 2901579, slip op. at *7
(same). Although “and” may be used cumulatively in some contexts, here, the
statutory language is plain and unambiguous–the provision requires that to come
within the definition of “toll telephone service” the rate must vary by both
“distance and elapsed transmission time.”
While true that the plain meaning rule is not to be blindly applied if
application leads to an absurd or futile result, Hughey v. JMS Development Corp.,
78 F.3d 1523, 1529 (11th Cir. 1996), here the plain meaning of the statute does not
lead to such a result. See America Online, 2005 WL 741847, at *7. “[T]o justify a
departure from the letter of the law upon that ground, the absurdity must be so
gross as to shock the general moral or common sense.” Crooks, 282 U.S. at 60, 51
S. Ct. at 50. Here, no gross absurdity results from a plain meaning interpretation
of the provision. The plain meaning is not an “unreasonable [interpretation]
plainly at variance with the policy of the legislation as a whole.” See United
States v. American Trucking Assoc., 310 U.S. 534, 543, 60 S. Ct. 1059, 1063, 84
11
L. Ed. 1345 (1940) (internal quotation marks omitted). Instead, using the plain
meaning furthers the Congressional intent at the time it was adopted. Moreover,
we note “that in statutes levying taxes the literal meaning of the words employed
is most important for such statutes are not to be extended by implication beyond
the clear import of the language used.” Crooks, 282 U.S. at 61, 51 S. Ct. at 51
(internal quotation omitted).
“The Court must presume that Congress meant what it said when it tailored
the definition of taxable ‘toll telephone service’ to include distance and time
requirements, particularly in light of the overall goal of the Act to reduce and
restrict the application of federal excise taxes.” Office Max, 309 F. Supp. 2d at
1000; see also Honeywell Int’l, Inc., 64 Fed.Cl. at 199-200; America Online, __
Fed. Cl. __, 2005 WL 741847, at *6. “While it may have been short-sighted of
Congress to define ‘toll telephone service’ to specifically address the charging
scheme used by AT&T in 1965, . . . ‘[i]t is beyond [the court’s] province to rescue
Congress from its drafting errors.” Honeywell Int’l, Inc., 64 Fed. Cl. at 199 (first
alteration in original) (quoting Lamie v. United States Tr., 540 U.S. 526, 542, 124
S. Ct. 1023, 1034, 157 L. Ed. 2d 1024 (2004) (internal marks and citation
omitted).
12
2. Revenue Ruling 79-404 does not provide support for abandoning §
4252(b)(1)’s plain meaning
The government also argues that in interpreting § 4252(b)(1) the district
court properly attributed “great weight” to Revenue Ruling 79-404. Revenue
Ruling 79-404 deals with whether communications services between onshore
facilities and offshore ships fall within § 4252(b)(1)’s definition of “toll telephone
service.” While acknowledging that “[l]iterally, the service provided in [the] case
does not come within the definition of . . . toll telephone service because the
charge for such services does not vary with distance and therefore does not meet
the requirement of section 4252(b)(1),” Rev. Rul. 79-404, 1979-2 C.B. 382 (1979)
(emphasis added), the IRS nonetheless concluded that “a statute may be given an
interpretation other than that which follows from its literal language where such
interpretation is required in order to comport with the legislative intent.” Id.; see
e.g. America Online, 2005 WL 741847, at *8.
The government argues that the court should give Revenue Ruling 79-404
Chevron deference . See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 104 S. Ct. 2278, 81 L. Ed. 2d 694 (1984). Under Chevron, the court
must first determine whether the congressional intent is clear. Chevron U.S.A.,
Inc., 467 U.S. at 843-44, 104 S. Ct. at 2781-82. If the intent is clear, the inquiry
13
ends; the court and agency “must give effect to the unambiguously expressed
intent of Congress.” Chevron, 467 U.S. at 843-44, 104 S. Ct. at 2781-82; see also
Ala. Power Co. v. United States Dep’t of Energy, 307 F.3d 1300, 1312-13 (11th
Cir. 2002) (holding agency interpretation did not overcome clear intent of statute
even if given Chevron deference).
Accordingly, because we hold that § 4252(b)(1) is clear and directly
answers the question here, the inquiry ends; we need not give deference to
Revenue Ruling 79-404. Moreover, we need not determine the proper level of
deference to be given Revenue Ruling 79-404. See Wilderness Watch v. Mainella,
375 F.3d 1085, 1091 n. 7 (11th Cir. 2004) (noting “[b]ecause [the court] hold[s]
that the Wilderness Act speaks directly to the question at issue, we need not
resolve the question of the precise level of deference due the agency action under
the second prong of Chevron”).
3. Re-enactment Doctrine is not applicable
The government contends that even if Revenue Ruling 79-404 is not
entitled to deference, under the re-enactment doctrine, Congress should be deemed
to have approved the Revenue Ruling because the federal communications excise
tax imposed under § 4251 has been amended and re-enacted since the publication
of Revenue Ruling 79-404. However, the re-enactment doctrine will serve to give
14
weight or approval to an agency interpretation only “[w]here an agency’s statutory
construction has been fully brought to the attention of the public and the Congress,
and the latter has not sought to alter that interpretation although it has amended the
statute in other respects, then presumably the legislative intent has been
discerned.” North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 535, 102 S. Ct. 1912,
1925, 72 L. Ed. 2d 299 (1982) (quotations omitted).
Here, not only is the statutory language clear under § 4252(b)(1), but there
is nothing to indicate that Congress was aware of Revenue Ruling 79-404 when it
subsequently amended and re-enacted this taxing statute. The legislative history
reveals no mention of Revenue Ruling 79-404 nor does the record reveal
consideration of the issue raised in the Ruling. See, e.g., Office Max, 309 F. Supp.
2d at 1004-1005. Thus, there is nothing to indicate Congress was aware of
Revenue Ruling 79-404 when the taxing provisions were re-enacted. See id.3
“When the ‘congressional discussion preceding re-enactment makes no reference
to the . . . regulation, and there is no other evidence to suggest that Congress was
3
Unlike Cottage Savings Association v. Commissioner, 499 U.S. 554, 111 S. Ct. 1503, 113
L. Ed. 2d 589 (1991), in which the defendant relied on Treasury Department regulations and the
precise issue was not addressed by the statute, here the government seeks to use as determinative
Revenue Rulings where the statute and its context address the issue before the court. In addition,
the treasury regulations at issue in Cottage Savings were “consistent with [the Supreme Court’s]
precedents . . . [preceding enactment and the] decisions were part of the contemporary legal context
in which Congress enacted [the statute at issue]” Id., 499 U.S. at 562, 111 S. Ct. at 1508 (internal
quotation omitted).
15
even aware of the . . . interpretive position[,] ‘we consider the . . . reenactment to
be without significance.’” America Online, 2005 WL 741847, at *9 (quoting
Brown v. Gardner, 513 U.S 115, at 121, 115 S. Ct. 552, 556, 1130 L. Ed. 2d 462
(1994) (quoting United States v. Calamaro, 354 U.S. 351, 359, 77 S. Ct. 1138, 1
L. Ed. 2d 1394 (1957)). Accordingly, Congressional approval cannot be inferred
from re-enactment of this statute. See America Online, 2005 WL 741847, at * 9;
Honeywell Int’l, Inc., 64 Fed. Cl. at 201; Office Max, 309 F. Supp. 2d at 1004-
1005; Fortis, 2004 WL 2085528, at *12; Reese, 2004 WL 2901579, at *12.
B. The services at issue are not within the statute
1. Services at issue do not vary by “distance”
The rates at issue vary according to whether the call is intrastate, interstate
or international. The government argues that “distance” as used in § 4252(b)(1),
includes the services at issue because the toll bands used (intrastate, interstate and
international) are based on distance. ABIG contends that the toll bands are not
based on distance, but are based on political units, i.e. the governmental entity
having regulatory authority over the services.
16
While there may be some correlation between distance and the geopolitical
subdivisions, the rates themselves do not vary by distance per se.4 The
jurisdictional boundaries–interstate, intrastate, and international–are divisions of
regulatory authority between the Federal Communications Commission and state
regulators. See Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 360, 106 S.
Ct. 1890, 1894, 90 L. Ed 2d 369 (1986). In Honeywell International, the
government made the same argument it makes here. See 64 Fed. Cl. at 201, at
*14. The Honeywell court, relying on the several other courts faced with this
issue, aptly reasoned that the rates at issue, similar to those at issue here, do not
vary by “distance” within the meaning of § 4252(b)(1).
‘Section 4252(b)(1) presumes a formula where the charge correlates
to both the elapsed time of the call and the distance–that is, the
mileage–that the call travels.’ Fortis, 2004 WL 2085528 at *13.
‘[T]elephone calls are designated according to geopolitical units due
to the federalist regulatory scheme and the demarcation of jurisdiction
between the Federal Communications Commission and state
regulatory agencies.’ Id.; see Office Max, 309 F. Supp. 2d at 995.
‘The distinctions between intrastate and interstate do not necessarily
correlate to distance because, for example, an intrastate call may well
travel a longer distance than certain interstate or even international
calls.’ Fortis, 2004 WL 2085528 at *13; see Office Max, 309 F.
4
As argued by ABIG counsel at oral argument, similarly, there is some correlation between
weight and belt size, however, weight does not necessarily coincide with belt size. See America
Online, 2005 WL 741847, at *9 (“A call from Dulles, Virginia to Toronto covers a shorter distance
than a call from Dulles to Seattle, and a call from Dulles to Philadelphia would be shorter than both,
yet the rate for calls to Seattle and Philadelphia would be the same, while the rate to Toronto would
be different.”).
17
Supp. 2d at 996; Reese, 2004 WL 2901579 at *12. . . . ‘[T]he
jurisdictional classifications employed in the long distance service at
issue does not amount to service where charges vary in amount with
distance and thus do not place the service within § 4252(b)(1)’s
definition of toll telephone service.’ Fortis, 2004 WL 2085528 at
*13; see Reese, 2004 WL 2901579 at *13.
Honeywell Int’l, Inc., 64 Fed. Cl. at 201; see also America Online, 2005 WL
741847, at *8. We agree with the above reasoning. Accordingly, we conclude
that the services at issue do not vary by “distance” as required under § 4252(b)(1).
2. Services at issue do not fall within § 4252(b)(2)
The government argues that even if the services at issue are not taxable
under § 4252(b)(1), the services fall within § 4252(b)(2) and are taxable under this
provision. The government urges that under a plain reading of this provision, the
services are taxable because the charge for the services at issue is “periodic.”
Section 4252(b)(2) applies to WATS service and provides:
[A] service which entitles the subscriber, upon payment of a periodic
charge (determined as a flat amount or upon the basis of total elapsed
transmission time), to the privilege of an unlimited number of
telephonic communications to or from all or a substantial portion of
the persons having telephone or radio telephone stations in a
specified area which is outside the local telephone system area in
which the station provided with this service is located.
18
26 U.S.C. § 4252(b)(2). Again, the government has made the very same argument
it makes here to several courts previously faced with this particular issue. We
agree with the reasoning of those earlier decisions.
Instead of paying for the “total elapsed transmission time” of the call, the
duration of each call is rounded up to the next highest billing increment and
multiplied by a postalized rate to produce a per call charge. Based upon the
foregoing, the services at issue are not subject to a “periodic charge.” ABIG’s
long distance services do not fall within the meaning of “toll telephone service” as
provided in § 4252(b)(2).
3. Services at issue are not “local” telephone service under § 4252(a)
Finally, the government contends, alternatively, that the services AT&T
provided to ABIG are taxable as local telephone services pursuant to § 4252(a).
Section 4252(a) defines “local telephone service” as:
(1) the access to a local telephone system, and the privilege of
telephonic quality communication with substantially all persons
having telephone or radio telephone stations constituting a part of
such local telephone system, and
(2) any facility or service provided in connection with a service
described in paragraph (1).
The term “local telephone service” does not include any service
which is a “toll telephone service” or a “private communication
service” as defined in subsection (b) and (d).
19
While conceding that “local” is not defined by the I.R.C., the government argues
that the legislative history demonstrates that the term is broad enough to cover the
services at issue. The government asserts that Congress used the term “local
telephone service” as a catchall in rearranging the telephone tax provision in the
1954 Internal Revenue Code defining “local telephone service” as telephone
service not taxable under § 4252. See 1954 I.R.C. § 4252(a). Thus, the
government argues that all services not specifically exempted under § 4253 are to
be taxed. In addition, the government contends that the 1958 redesignation of
local telephone service as “general telephone service” did not remove local
telephone service from the tax base.
The government’s interpretation of “local telephone service” would make
the statute a nullity. “It is hardly a plain or natural reading of the statute to claim
that the entire United States is part of one ‘local telephone system.’” Honeywell
Int’l, Inc., 64 Fed. Cl. at 203 (quoting Fortis, 2004 WL 2085528 at *15); see also
Office Max, 309 F. Supp. 2d at 1007 (finding the government’s argument that the
services should be deemed local telephone service because Congress had to intend
to tax the service at issue, “entirely unpersuasive” and holding “[t]here is
absolutely no basis upon which to find that the long-distance service at issue
herein falls within the statutory definition of ‘local telephone service’). Moreover,
20
“[t]he government’s argument mischaracterizes the structure of the statute[.]
Section 4251 sets out which items will be taxed, . . . Section 4252 defines those
terms[, and] Section 4253 grants exemptions to certain services . . . . The fact that
certain exemptions are specified does not mean that anything not expressly
exempted is taxed.” America Online, 2005 WL 741847, at *11. Accordingly, we
conclude that the services at issue are not taxable as “local” telephone service
under § 4252(a).
V. CONCLUSION
For the foregoing reasons, we reverse the district court’s grant of the
government’s cross-motion for summary judgment and remand this case with
instructions that the district court enter judgment in favor of ABIG.
REVERSED and REMANDED.
21
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